Redwood Trust, Inc. (NYSE:RWT; "Redwood", the "Company", "we" or "our"), a leader in expanding access to housing for homebuyers and renters, today reported its financial results for the quarter ended December 31, 2023.
Key Q4 2023 Financial Results and Metrics
Operational Business Highlights
Residential Consumer Mortgage Banking(4)
Residential Investor Mortgage Banking(4)
Investment Portfolio
Financing Highlights
Q1 2024 Highlights to Date(10)
"As Redwood approaches our 30th anniversary, the landscape for housing finance is undergoing a profound transformation, where adaptability is the key to success," said Christopher Abate, Chief Executive Officer of Redwood. "With the work we completed across 2023 to bolster our capital base, we expect 2024 to be foundational to our long-term success as we expand our partnerships and distribution channels, and set Redwood on a course for earnings growth and stability in the quarters and years ahead."
_____________________
Fourth Quarter 2023 Redwood Review and Supplemental Tables Available Online
A further discussion of Redwood's business and financial results is included in the fourth quarter 2023 Shareholder Letter and Redwood Review which are available under "Financial Info" within the Investor Relations section of the Company's website at redwoodtrust.com/investor-relations. Additional supplemental financial tables can also be found within this section of the Company's website.
Conference Call and Webcast
Redwood will host an earnings call today, February 20, 2024, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its fourth quarter 2023 financial results. The number to dial in order to listen to the conference call is 1-877-423-9813 in the U.S. and Canada. International callers must dial 1-201-689-8573. A replay of the call will be available through midnight on Tuesday, March 5, 2024, and can be accessed by dialing 1-844-512-2921 in the U.S. and Canada or 1-412-317-6671 internationally and entering access code #13743395.
The conference call will be webcast live in listen-only mode through the News & Events section of Redwood's Investor Relations website at https://www.redwoodtrust.com/investor-relations/news-events/events. To listen to the webcast, please go to Redwood's website at least 15 minutes before the call to register and to download and install any needed audio software. An audio replay of the call will also be available on Redwood's website following the call. Redwood plans to file its Annual Report on Form 10-K with the Securities and Exchange Commission by Thursday February 29, 2024, and also make it available on Redwood's website.
About Redwood
Redwood Trust, Inc. (NYSE: RWT) is a specialty finance company focused on several distinct areas of housing credit. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors, through our best-in-class securitization platforms; whole-loan distribution activities; and our publicly traded shares. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential consumer and investor housing credit assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking and Investment Portfolio. Additionally, through RWT Horizons®, our venture investing initiative, we invest in early-stage companies strategically aligned with our business across the lending, real estate, and financial technology sectors to drive innovations across our residential and business-purpose lending platforms. Since going public in 1994, we have managed our business through several cycles, built a track record of innovation, and established a best-in-class reputation for service and a common-sense approach to credit investing. Redwood Trust is internally managed and structured as a real estate investment trust ("REIT") for tax purposes. For more information about Redwood, please visit our website at www.redwoodtrust.com or connect with us on LinkedIn.
Cautionary Statement; Forward-Looking Statements:
This press release and the related conference call contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to the amount of residential mortgage loans that we identified for purchase during the fourth quarter of 2023, expected fallout and the corresponding volume of residential mortgage loans expected to be available for purchase, and the expected timing for the filing of Redwood's Annual Report on Form 10-K. Forward-looking statements involve numerous risks and uncertainties. Redwood's actual results may differ from Redwood's beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as "anticipate," "estimate," "will," "should," "expect," "believe," "intend," "seek," "plan" and similar expressions or their negative forms, or by references to strategy, plans, opportunities, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2022 under the caption "Risk Factors". Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the Securities and Exchange Commission, including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
REDWOOD TRUST, INC.
($ in millions, except per share data) |
Three Months Ended |
||||||
|
12/31/2023 |
|
9/30/2023 |
||||
Financial Performance |
|
|
|
||||
Net income (loss) per diluted common share |
$ |
0.15 |
|
|
$ |
(0.29 |
) |
Net income (loss) per basic common share |
$ |
0.15 |
|
|
$ |
(0.29 |
) |
EAD per basic common share (non-GAAP) |
$ |
0.05 |
|
|
$ |
0.10 |
|
|
|
|
|
||||
Return on Common Equity ("ROE") (annualized) |
|
7.3 |
% |
|
|
(12.3 |
) % |
EAD Return on Common Equity ("EAD ROE") (annualized, non-GAAP) |
|
2.7 |
% |
|
|
4.7 |
% |
|
|
|
|
||||
Book Value per Common Share |
$ |
8.64 |
|
|
$ |
8.77 |
|
Dividend per Common Share |
$ |
0.16 |
|
|
$ |
0.16 |
|
Economic Return on Book Value (1) |
|
0.3 |
% |
|
|
(3.6 |
) % |
|
|
|
|
||||
Recourse Leverage Ratio (2) |
2.2x |
|
2.3x |
||||
Operating Metrics |
|||||||
Business Purpose Loans |
|
|
|
||||
Term fundings |
$ |
117 |
|
|
$ |
106 |
|
Bridge fundings |
|
226 |
|
|
|
305 |
|
Term securitized |
|
? |
|
|
|
278 |
|
Bridge securitized |
|
250 |
|
|
|
? |
|
Term sold |
|
48 |
|
|
|
27 |
|
Bridge sold |
|
63 |
|
|
|
34 |
|
Residential Jumbo Loans |
|
|
|
||||
Locks |
$ |
1,165 |
|
|
$ |
1,637 |
|
Purchases |
|
1,004 |
|
|
|
815 |
|
Securitized |
|
708 |
|
|
|
338 |
|
Sold |
|
35 |
|
|
|
54 |
|
|
|
|
|
(1) Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share during the period.
(2) Recourse leverage ratio is defined as recourse debt at Redwood divided by tangible stockholders' equity. At December 31, 2023, and September 30, 2023, recourse debt excluded $10.5 billion and $9.3 billion, respectively, of consolidated securitization debt (ABS issued and servicer advance financing) and other debt that is non-recourse to Redwood, and tangible stockholders' equity excluded $52 million and $55 million, respectively, of goodwill and intangible assets.
REDWOOD TRUST, INC.
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Income Statements (1) |
|
Three Months Ended |
||||||||||||||||||
($ in millions, except share and per share data) |
|
12/31/23 |
|
9/30/23 |
|
6/30/23 |
|
3/31/23 |
|
12/31/22 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income |
|
$ |
190 |
|
|
$ |
177 |
|
|
$ |
179 |
|
|
$ |
179 |
|
|
$ |
173 |
|
Interest expense |
|
|
(170 |
) |
|
|
(157 |
) |
|
|
(153 |
) |
|
|
(152 |
) |
|
|
(146 |
) |
Net interest income |
|
|
20 |
|
|
|
20 |
|
|
|
26 |
|
|
|
26 |
|
|
|
27 |
|
Non-interest income (loss) |
|
|
|
|
|
|
|
|
|
|
||||||||||
Residential consumer mortgage banking activities, net |
|
|
8 |
|
|
|
9 |
|
|
|
7 |
|
|
|
3 |
|
|
|
(14 |
) |
Residential investor mortgage banking activities, net |
|
|
6 |
|
|
|
10 |
|
|
|
9 |
|
|
|
13 |
|
|
|
(3 |
) |
Investment fair value changes, net |
|
|
15 |
|
|
|
(42 |
) |
|
|
(14 |
) |
|
|
(4 |
) |
|
|
(24 |
) |
HEI income, net |
|
|
12 |
|
|
|
10 |
|
|
|
9 |
|
|
|
4 |
|
|
|
1 |
|
Other income, net |
|
|
2 |
|
|
|
2 |
|
|
|
4 |
|
|
|
5 |
|
|
|
4 |
|
Realized gains, net |
|
|
1 |
|
|
|
? |
|
|
|
1 |
|
|
|
? |
|
|
|
3 |
|
Total non-interest income (loss), net |
|
|
44 |
|
|
|
(10 |
) |
|
|
17 |
|
|
|
21 |
|
|
|
(33 |
) |
General and administrative expenses |
|
|
(32 |
) |
|
|
(30 |
) |
|
|
(31 |
) |
|
|
(36 |
) |
|
|
(39 |
) |
Portfolio management costs |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
Loan acquisition costs |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Other expenses |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
(Provision for) benefit from income taxes |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
? |
|
|
|
1 |
|
|
|
9 |
|
Net income (loss) |
|
$ |
21 |
|
|
$ |
(31 |
) |
|
$ |
3 |
|
|
$ |
5 |
|
|
$ |
(44 |
) |
Dividends on preferred stock |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
? |
|
Net income (loss) available (related) to common stockholders |
|
$ |
19 |
|
|
$ |
(33 |
) |
|
$ |
1 |
|
|
$ |
3 |
|
|
$ |
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average basic common shares (thousands) |
|
|
121,927 |
|
|
|
115,466 |
|
|
|
114,051 |
|
|
|
113,679 |
|
|
|
113,363 |
|
Weighted average diluted common shares (thousands) (2) |
|
|
122,474 |
|
|
|
115,466 |
|
|
|
114,445 |
|
|
|
114,135 |
|
|
|
113,363 |
|
Earnings (loss) per basic common share |
|
$ |
0.15 |
|
|
$ |
(0.29 |
) |
|
$ |
? |
|
|
$ |
0.02 |
|
|
$ |
(0.40 |
) |
Earnings (loss) per diluted common share |
|
$ |
0.15 |
|
|
$ |
(0.29 |
) |
|
$ |
? |
|
|
$ |
0.02 |
|
|
$ |
(0.40 |
) |
Regular dividends declared per common share |
|
$ |
0.16 |
|
|
$ |
0.16 |
|
|
$ |
0.16 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Income Statement - Changes from Third Quarter 2023 to Fourth Quarter 2023
REDWOOD TRUST, INC. |
|
|
|
|
||||
Consolidated Income Statements (1) |
|
Year ended December 31, |
||||||
($ in millions, except share and per share data) |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
||||
Interest income |
|
$ |
724 |
|
|
$ |
708 |
|
Interest expense |
|
|
(632 |
) |
|
|
(552 |
) |
Net interest income |
|
|
93 |
|
|
|
155 |
|
Non-interest income (loss) |
|
|
|
|
||||
Residential consumer mortgage banking activities, net |
|
|
28 |
|
|
|
(21 |
) |
Residential investor mortgage banking activities, net |
|
|
40 |
|
|
|
8 |
|
Investment fair value changes, net |
|
|
(44 |
) |
|
|
(178 |
) |
HEI income, net |
|
|
35 |
|
|
|
3 |
|
Other income, net |
|
|
13 |
|
|
|
21 |
|
Realized gains, net |
|
|
2 |
|
|
|
5 |
|
Total non-interest income (loss), net |
|
|
73 |
|
|
|
(163 |
) |
General and administrative expenses |
|
|
(128 |
) |
|
|
(141 |
) |
Portfolio management costs |
|
|
(15 |
) |
|
|
(8 |
) |
Loan acquisition costs |
|
|
(7 |
) |
|
|
(12 |
) |
Other expenses |
|
|
(16 |
) |
|
|
(16 |
) |
(Provision for) benefit from income taxes |
|
|
(2 |
) |
|
|
20 |
|
Net loss |
|
$ |
(2 |
) |
|
$ |
(164 |
) |
Dividends on preferred stock |
|
|
(7 |
) |
|
|
? |
|
Net loss related to common stockholders |
|
$ |
(9 |
) |
|
$ |
(164 |
) |
|
|
|
|
|
||||
Weighted average basic common shares (thousands) |
|
|
116,283 |
|
|
|
117,228 |
|
Weighted average diluted common shares (thousands) |
|
|
116,283 |
|
|
|
117,228 |
|
Earnings (loss) per basic common share |
|
$ |
(0.11 |
) |
|
$ |
(1.43 |
) |
Earnings (loss) per diluted common share |
|
$ |
(0.11 |
) |
|
$ |
(1.43 |
) |
Regular dividends declared per common share |
|
$ |
0.71 |
|
|
$ |
0.92 |
|
|
|
|
|
|
REDWOOD TRUST, INC.
|
|
|
|
|
|
|
|
|
|
|
|||||
Consolidated Balance Sheets (1) |
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions, except share and per share data) |
|
12/31/23 |
|
9/30/23 |
|
6/30/23 |
|
3/31/23 |
|
12/31/22 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential loans |
|
$ |
7,051 |
|
$ |
5,847 |
|
$ |
5,456 |
|
$ |
5,493 |
|
$ |
5,613 |
Business purpose loans |
|
|
5,220 |
|
|
5,249 |
|
|
5,227 |
|
|
5,365 |
|
|
5,333 |
Consolidated Agency multifamily loans |
|
|
425 |
|
|
421 |
|
|
420 |
|
|
427 |
|
|
425 |
Real estate securities |
|
|
128 |
|
|
129 |
|
|
167 |
|
|
243 |
|
|
240 |
Home equity investments (HEI) |
|
|
550 |
|
|
431 |
|
|
427 |
|
|
417 |
|
|
403 |
Other investments |
|
|
344 |
|
|
340 |
|
|
356 |
|
|
382 |
|
|
391 |
Cash and cash equivalents |
|
|
293 |
|
|
204 |
|
|
357 |
|
|
404 |
|
|
259 |
Other assets |
|
|
493 |
|
|
399 |
|
|
387 |
|
|
391 |
|
|
367 |
Total assets |
|
$ |
14,504 |
|
$ |
13,021 |
|
$ |
12,797 |
|
$ |
13,121 |
|
$ |
13,031 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term debt, net |
|
$ |
1,558 |
|
$ |
1,477 |
|
$ |
1,457 |
|
$ |
1,616 |
|
$ |
2,030 |
Other liabilities |
|
|
251 |
|
|
217 |
|
|
230 |
|
|
187 |
|
|
197 |
Asset-backed securities issued, net |
|
|
9,812 |
|
|
8,392 |
|
|
8,183 |
|
|
8,447 |
|
|
7,987 |
Long-term debt, net |
|
|
1,681 |
|
|
1,830 |
|
|
1,802 |
|
|
1,733 |
|
|
1,733 |
Total liabilities |
|
|
13,302 |
|
|
11,915 |
|
|
11,673 |
|
|
11,984 |
|
|
11,947 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' equity |
|
|
1,203 |
|
|
1,106 |
|
|
1,124 |
|
|
1,138 |
|
|
1,084 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Total liabilities and equity |
|
$ |
14,504 |
|
$ |
13,021 |
|
$ |
12,797 |
|
$ |
13,121 |
|
$ |
13,031 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Common shares outstanding at period end (thousands) |
|
|
131,486 |
|
|
118,504 |
|
|
114,178 |
|
|
113,864 |
|
|
113,485 |
GAAP book value per common share |
|
$ |
8.64 |
|
$ |
8.77 |
|
$ |
9.26 |
|
$ |
9.40 |
|
$ |
9.55 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Disclosures
|
|
|
|
|
|
||||
Reconciliation of GAAP Net Income (Loss) Available (Related) to Common Stockholders to non-GAAP Earnings Available for Distribution(1)(2)(3) |
|
Three Months Ended |
|||||||
($ in millions, except share and per share data) |
|
12/31/23 |
|
9/30/23 |
|
||||
|
|
|
|
|
|
||||
GAAP Net income (loss) available (related) to common stockholders |
|
$ |
19 |
|
|
$ |
(33 |
) |
|
|
|
|
|
|
|
||||
Adjustments: |
|
|
|
|
|
||||
Investment fair value changes, net(4) |
|
|
(15 |
) |
|
|
42 |
|
|
Realized (gains)/losses, net(5) |
|
|
(1 |
) |
|
|
? |
|
|
Acquisition related expenses(6) |
|
|
3 |
|
|
|
3 |
|
|
Tax effect of adjustments(7) |
|
|
? |
|
|
|
? |
|
|
|
|
|
|
|
|
||||
Earnings Available for Distribution (non-GAAP) |
|
$ |
7 |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
||||
Earnings (loss) per basic common share |
|
$ |
0.15 |
|
|
$ |
(0.29 |
) |
|
EAD per basic common share (non-GAAP) |
|
$ |
0.05 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
||||
GAAP Return on Common Equity (annualized) |
|
|
7.3 |
% |
|
|
(12.3 |
)% |
|
EAD Return on Common Equity (non-GAAP, annualized)(8) |
|
|
2.7 |
% |
|
|
4.7 |
% |
|
|
|
|
|
|
|
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